The European Central Bank decided to keep interest rates the same, which helped the Euro rise after positive updates on growth and inflation. Still, excitement about possible rate increases by late 2026 is low. In the short term, differences in interest rates are not likely to raise the Euro much. The currency may strengthen in early 2026 because of a weak US dollar, possible labor market issues, and reduced geopolitical threats affecting the Euro Area.

Central Bank Decisions

In other news, Banxico lowered interest rates from 7.25% to 7%, which was expected. The Bank of England also cut rates to 3.75%, a more aggressive move than many predicted, impacting market rates and giving a slight boost to the pound. Gold prices remain steady at around $4,330, with little interest from traders following central bank news. In cryptocurrencies, Bitcoin and Ethereum have stable prices, with mixed flows into ETFs, while Ripple is trading between $1.82 and $2.00, facing low retail demand. Currency pairs have seen changes because of economic factors, like the EUR/USD approaching 1.1700 after the ECB decisions and US inflation data affecting the dollar. The GBP/USD also moved in response to updates from the Bank of England and US CPI. The European Central Bank’s choice to keep rates unchanged while upgrading growth forecasts sends a clear message. This position seems strong, especially when compared to the US situation. We see this as a chance to plan for a stronger Euro in the upcoming weeks.

Economic Outlook

Recent US Non-Farm Payrolls data showed only 95,000 jobs added in November 2025, falling short of the expected 180,000. This indicates a slowing labor market. The Consumer Price Index also reported a 2.6% year-over-year increase, putting pressure on the Federal Reserve to think about easing policies. These trends are creating negative feelings about the US Dollar. Considering this outlook, we plan to buy EUR/USD call options that expire in late January and February 2026. The implied volatility on these options is still reasonable, showing the market hasn’t fully anticipated a potential rise in early 2026. This strategy allows us to take advantage of expected growth with defined risk. We should keep in mind that the Federal Reserve’s aggressive rate hikes in 2023 and 2024 are now leading to risks for the US economy. The interest rate advantage that supported the dollar for so long is expected to decrease. This change in central bank policies is a significant factor for our current perspective. Even with the dollar facing challenges, gold is stabilizing around $4,330, which suggests some caution remains. However, we believe the main focus should be on variations in currency pairs rather than moving broadly towards safe havens. The current conditions favor a pro-Euro trade rather than just an anti-dollar one. Create your live VT Markets account and start trading now.

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